Intelligent Decision Reference | Pay attention to whether LJZ Forum can bring unexpected positive news

【Chief Editor's Market View】

Under the impact of various unfavorable factors, the Hong Kong stock market continued to decline last week, with the index falling below the 18,000 mark.

The Federal Reserve's forward guidance for the June interest rate meeting remains hawkish, but with the easing of U.S. CPI, the market feedback is relatively positive, leading to expectations of two interest rate cuts within the year starting in September. The Nasdaq and S&P in the U.S. continue to hit new highs.

However, the focus of the Hong Kong stock market is on Europe, where the rise of far-right political parties and the use of frozen Russian assets as collateral at the G7 meeting to provide a $50 billion loan to Ukraine undoubtedly pose significant risks to Europe. Additionally, Europe's latest introduction of import tariffs on Chinese electric vehicles is expected to trigger retaliatory measures. European stock markets across the board experienced declines.

Domestically, the social financing data is also not ideal, with the central bank data showing a year-on-year decrease of 4.2% in M1 in May, indicating relatively weak real demand. Only a preference for government bonds is observed.

The European Championship has officially begun. This week, attention will be on whether there will be any movements in the June Loan Prime Rate (LPR), and the market will also welcome the window for adjustments in the Medium-term Lending Facility (MLF) rate on June 17.

Another major event is the 2024 Lujiazui Forum, which will be held from June 19 to 20. The theme of this Lujiazui Forum is "Promoting World Economic Growth through High-Quality Financial Development," where the China Securities Regulatory Commission will release relevant capital market policies and measures. The Commission stated that it will jointly establish a collaborative mechanism with the Shanghai municipal government to support the acceleration of the construction of five centers in Shanghai, thereby enhancing the competitiveness and influence of Shanghai as an international financial center. Li Jia Chao mentioned that the status of Hong Kong as an international financial and shipping center remains stable.

The key to whether the market can rebound this week lies in whether the Lujiazui Forum can bring about better-than-expected positive news, while changes in interest rates are also crucial, with corresponding sectors being finance and real estate.

In other news, the Huawei Developer Conference 2024 will be held from June 21 to 23 in Songshan Lake, Dongguan, where Huawei will showcase its latest achievements such as HarmonyOS, Pangu large model, Ascend AI cloud services, GaussDB data, etc. Pay attention to opportunities related to Huawei-affiliated companies. The 2024 World Intelligent Industry Expo will be held from June 20 to 23 in Tianjin for the first time, with the theme "Intelligence Drives the World, Energy Shapes the Future." Robotics can be of interest.

【Stock Picks of the Week】

Xinjiang Goldwind Science & Technology Co., Ltd. (03800)

On June 11, the annual event of the photovoltaic industry - the 17th (2024) International Solar Photovoltaic and Smart Energy (Shanghai) Conference and Exhibition was held at the National Exhibition and Convention Center (Shanghai). Zhu Gongshan, Chairman of Goldwind Group, delivered a keynote speech on "The Era of Great Changes in Photovoltaics under the Background of New Quality Productivity": The revolutionary breakthrough window for photovoltaic technology is approaching.

The current market mismatch feedback does not affect the high-growth trend of the industry. On the demand side: photovoltaics will be deeply embedded in the construction of new power systems; "Photovoltaics + Solid-State Batteries + High-Efficiency Energy Storage + Super Fast Charging" will build an energy foundation for the low-altitude economy Currently, the global industrial chain is undergoing a deep restructuring, and it is inevitable for China's photovoltaic industry to go global comprehensively. In the next five years, the market size of perovskite stacked batteries is expected to increase exponentially.

The company has completely exited the rod silicon field after 23 years and shifted its focus to granular silicon. The annual production of granular silicon has reached 203,600 tons, with a 27% decrease in annual cost due to technological optimization, modular capacity expansion, and quality improvement. The production cost at the Baotou base has dropped to as low as 35.9 yuan per kilogram, with a continuous expansion of cost advantage over rod silicon, and the market share is expected to further increase. The company's modular capacity expansion is accelerating, and it is expected that the capacity by the end of 2024 will approach 500,000 tons.

The company's four major bases are expected to maintain a high capacity utilization rate after Q2 2024, with the overall cash cost/full cost expected to reach below 34 yuan/40 yuan per kilogram by the end of the year. Compared to the top-quality companies using the Siemens process with a cash cost range of 35 yuan per kilogram, the company still has a significant advantage. The company recently signed a three-year purchase contract with silicon wafer leader Longi for 425,000 tons, which is beneficial for rapidly increasing market share, combined with CCZ to improve the pulling efficiency. In addition, the company has continuously improved the efficiency of perovskite components since acquiring a 45% stake in Xiamen Weihua holding Xinjiang GCL Photovoltaic in 2023.

[Industry Observation]

International beauty industry is facing another round of price increases. Starting from July this year, L'Oreal Group's brands such as Lancome, Armani, and Shu Uemura may initiate a new round of price increases, with an expected increase of around 5%-10%. Prior to this, Estee Lauder Group had issued a price adjustment notice, and starting from July this year, some products under Estee Lauder Group will undergo price adjustments, including brands like Estee Lauder, La Mer, MAC, TF, Bobbi Brown, and Jo Malone. The price increase for Estee Lauder brand products this time is within 10%.

In the domestic market, during the 618 shopping festival, the sales performance of the cosmetics industry was impressive. Despite the adjustment in promotion pace on the Tmall platform, with the first round of sales starting on May 20, earlier than last year, the overall sales feedback was positive. For example, brands with good growth potential such as Pechoin and Kans, had already exceeded the sales level of the same period last year in May, demonstrating strong market demand and brand sales capabilities. In contrast, overall performance of European and American brands was relatively flat (subsequent price increases may accelerate the decline in market share in China), while Japanese brands saw a decline in rankings due to the impact of last year's nuclear wastewater incident. The final sprint of the 618 beauty festival is approaching, with Tmall/Douyin platforms ending on 6.20/6.18 respectively, focusing on the final surge in sales. Leading domestic brands continue to outperform, and there is optimism about the excess growth brought by leading domestic brands.

China's CPI has been growing positively for four consecutive months, indicating a rebound in market expectations for consumer deflation. Confidence in the transmission of CPI to end-user optional consumption still needs to be strengthened, leading to a relatively pessimistic market outlook for high-end consumption. However, the growth rate of cosmetics in the mass market segment is significantly better than the high-end sector, potentially offering investment opportunities.

In the Hong Kong stock market, focus on Juzi Biotech (02367). Juzi Biotech's Kans and Kans Gold brands continue to achieve excellent growth during the 618 promotion period. It is expected that driven by the 618 festival, the company's performance in 24H1 and even the full year of 24 will exceed expectations. In terms of new products, the focus cream was launched at the end of March In the off-season in April, Douyin's GMV accounted for over 30% of KeFuMei's overall GMV, while in the peak season in May, the proportion exceeded 10%. In addition, Juzi Biotech's medical beauty business has not yet been fully reflected in the total market value; the company has accumulated a large number of medical beauty distribution resources through Keli Venus Light, and is expected to quickly expand its scale after product approval, with the potential to excel in the collagen track.

【Market Data】

Data released by the Hong Kong Stock Exchange shows that the total number of open contracts for the Hang Seng Index (June) is 128,423 contracts, with a net open position of 41,207 contracts. The settlement date for the Hang Seng Index is June 27, 2024.

Looking at the distribution of bull and bear positions in the Hang Seng Index, at the 17,942 level, the bull certificates are concentrated near the axis, providing shorting power for Hong Kong stocks. The US Federal Reserve's FOMC decided to keep interest rates unchanged, but adjusted the forward guidance from an expected three rate cuts in the first quarter of this year to around one, which is definitely a strong policy signal, in line with the trend of inflation data in recent months and analysts' expectations. The Hang Seng Index is expected to decline this week.

【Editor's Note】

Despite the market correction, there is no need to be too pessimistic. From a global perspective, this year is mainly characterized by a general rise and catch-up rally in risk assets globally. Developed markets are leading the way, while emerging markets are catching up; growth stocks are leading, while value stocks are catching up. From this perspective, global risk assets are still on the rise. Especially, Hong Kong stocks are quite cheap, having experienced the largest decline in the past. Foreign capital that entered in April and May has not left, but is still observing, providing some support for Hong Kong stocks.

In the A-share market, the concept of "Cotechu" is being speculated, which often does not hold much significance in the Hong Kong stock market. The Hong Kong stock market focuses more on industry and company fundamentals. "Expectations of improved performance" are key. Consumer electronics and chip stocks have recently performed well, not due to "Cotechu," but as an external manifestation of improved industry sentiment.

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